Author: Riya Verma, 1st year student at Hidayatullah National Law University.
Citation: 2021 SCC OnLine SC 233
Date of Decision: 19 March 2021
Bench: Rohinton Fali Nariman, B.R. Gavai, Hrishikesh Roy
Original copy: N/A
Statute Involved: Arbitration and Conciliation Act of 1996 (“A&C Act”), Commercial Courts Act 2015.
- The Supreme Court of India (“Supreme Court”) recently reversed one of its earlier decisions in the case of NV International v. State of Assam (“NV International”) in Government of Maharashtra v. M/s Borse Brothers Engineers & Contractors Pvt. Ltd. (“Borse Brothers”).
- According to the Supreme Court, a party who has been wronged has 60 days from the date of the judgement to file an appeal under Section 37 of the Arbitration and Conciliation Act of 1996 (“A&C Act”). The Supreme Court also held that, under Section 37 of the A&C Act, an appellate court might forgive a delay in submitting an appeal.
However, such an exception should only be granted as a last option, and only if the delay is ‘short.’
The High Courts of Bombay and Delhi had declined to excuse delays in filing appeals under Section 37 of the A&C Act beyond 120 days in two petitions before the Supreme Court. Another appeal was filed against a ruling of the High Court of Madhya Pradesh, which found that under Section 5 of the Limitation Act, 1963 (“Limitation Act”), a High Court might excuse a delay in filing an appeal under Section 37.
Three distinct High Court rulings were the subject of appeals.
By a single ruling dated March 19, 2020, the Supreme Court consolidated and dismissed three appeals.
Because the A&C Act makes no provision for a time restriction for bringing an appeal under Section 37, the Court was faced with the following issues:
- Whether the Court’s judgement in N.V. International v. State of Assam, which held that the limitation period for filing a petition to challenge an award under Section 34(3) of the A&C Act can be construed to be the limitation period for filing an appeal against the order under Section 37 of the A&C Act, correctly lays down the law?
- Whether a delay in filing an appeal under Section 37 of the A&C Act can be excused by the appellate court?
- In NV International, the Supreme Court held that the time limits for an appeal against an order under Section 34, i.e., a period of three months, extendable by a further thirty, in the absence of a limitation period to prefer an appeal pursuant to Section 37 of the Law of Arbitration and Conciliation, would be limited for the time limitation under Section 34. Thus, for the period of limitation applicable to proceedings pursuant to Section 34, an appeal in accordance with Section 37 would be applied too. The Supreme Court found that the requirements of the Commercial Courts Act, 2015 were not considered by N.V. International in determining the limitation time for an appeal under Section 37. As a result, it was due to inadvertence in this regard. Furthermore, the Commercial Courts Act held that a ‘bodily lifting’ of the limitation period under Section 34 of the Arbitration and Conciliation Act into Section 37 of the A&C Act was not permitted due to the hard stop provided in Section 34 versus its absence in Section 13 of the Commercial Courts Act. As a result, the limitation period under Section 34 of the Arbitration and Conciliation Act, 1996 could not be extended into the appeal provision under Section 37 of the Act.
- The Supreme Court emphasised that any delay must be excused by the appellate court as an exception rather than a rule, and only in cases where:
- a) A party has otherwise acted bona fide and not negligently,
- b) There is a brief delay beyond the statutory period,
- c) The opposing party is not prejudiced of his rights in equity and justice arising out of the erring party’s inaction
- d) The Supreme Court further stated, citing one of its previous judgments, that even because sufficient cause has been established in the circumstances of a case, the appellant has no right to have the delay excused.
- The Supreme Court thus made the time restriction clear for submitting appeals under Section 37 of the A&C Act. In this case, the appeals have been made clear. The Court also opened up the possibility to accept delays in submitting an appeal in accordance with Section 37 of the A&C Act, which only allowed ‘brief delays.’ The aim of this is to resolve conflicts expeditiously, as evidenced in the recent revisions to the A&C and CC laws.
- The decision provides for forgiveness to be given only in rare situations, and that tribunals must adhere to stringent criteria to condone such delay whether the appellant’s acts are correct and if there is any harm to the opposing parties. This has been done by the Supreme Court.
- It is appropriate that the Supreme Court notes that Section 13(1A) of the CC Act governs most appeals pursuant to Section 37 of the A&C Act. As a result, all appeals according to Article 37 of the A&C Act involving a trade conflict of the Specified Value in accordance with the CC Act will be subject to a standard term of 60 days.
- The Court has also solved the potential challenge created by N.V. International to the application of different and continuing periods of limitation of original procedures in appeal proceedings under Section 37 with a uniform period of 60 days for filing all appeals under Section 37 of the A&C Act concerning commercial disputes involving the Specified Value of the appeal. In speed with the settlement of disputes, the Supreme Court highlighted the purpose of both the A&C and the CC Act. In light of the above and as maintained in the Court, it is important to interpret provisions in the A&C Act and the CC Act in line with the purpose of the Act and to avoid any construction, instead of resulting in a speedy resolution, that delays the processes.